Organizational structure determines a division of labor and shows the relationship between the various functions and operations. An essential part of the organizational design is the grouping of posts according to the logical system. The elements may be grouped on the basis of the similarity of the acts performed by them as well as around a common subject of the work. In addition to above mentioned two basic criteria for grouping there are more.

Grouping by functions

Description of grouping by function follows below. Is involves connecting posts that require the same or similar activities, competences. This criterion enables the recruitment for each unit of experts in the field, with similar qualifications. In addition, facilitates the coordination of activities in each unit, eases supervision and allows for economies of scale in the implementation of a function. Weaknesses of grouping by functions can be: slower and bureaucratic decision-making process, results of work hard to observe. Employees may be too narrowly focused on their organizational units and lose sight of the whole system.

Grouping by object of work

Next grouping criterion is done according to item produced. It involves the allocation of activities around the products or product groups. The advantages of such an approach is the ease of integration and coordination of all the activities around one group of products, greater speed and efficiency of decision making and the ability to relatively cheaper and objective assessment of the results of employees. The criterion is also not ideal, since the managers of particular department are excessively focused only on their product, neglecting the rest of the organization. It is followed by an increase in administrative costs, because each unit must have their own professionals for issues such as marketing and financial analysis. Yet another type of grouping of the organization is grouping according to the client type. The purpose of this form of grouping is better servicing of specific clients or groups. It allows the organization to use qualified professionals for servicing particular client group (i.e. individual or institutional). The difficulty in maintaining a consistent company policy and the requirement for quite a large administrative staff can cause adverse effect in this type of grouping.

Grouping by the territorial criterion

Posts can also be grouped on the basis of territorial criteria. It allows organizations to respond to the specific requirements of the client and environmental characteristics of different geographical regions. The disadvantage of this type of grouping is the need quite a large administrative staff. There are still other forms of grouping, to which we can include grouping: by time, by sequence, by stage in process, etc.